Top 6 Chart Patterns for Crypto Trading Guide

It’s important to keep in mind that the market is ultimately unpredictable and can defy predictions at any moment. If you’re going to use triangle patterns, make sure you take positions only after you confirm a breakout in the price action of the security in question. They can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure. Traders use triangles to pinpoint when the narrowing of a stock or security’s trading range after a downtrend or uptrend occurs.

Traders usually place their long positions at the exit of the handle pattern. Your long price target should be the depth of the cup, which in this case equates to ~$9000. The price encounters overbought conditions and tests the resistance zone twice. Your short target price will be the difference from the support to the resistance. In this case, it equates to ~$5000, so your price target would be around ~$53.000 after the support is broken at ~$58.000.

1. To read crypto chart patterns, you need to learn that each cryptocurrency price chart consists of a price ticker.
2. Once the price starts to move in one of the two directions following the identification of a symmetrical triangle, traders can open their positions accordingly.
3. The Bart Simpson is an unusual and distinctive chart pattern named for its resemblance to the spiky hair of the cartoon character Bart Simpson.
4. It forms when the price of a cryptocurrency consolidates between a horizontal resistance line and an ascending support line.
5. They display data like price, volume, and timeframes to help traders analyse market trends.

How to find Double Top, Double Bottom, and Rounded Bottom Patterns: Use Cases

This means the price is making higher highs and higher lows, but they’re coming together, making the wedge shape narrow at one end. A Flag pattern forms after a sharp move up or down, followed by a small, sloping rectangle that looks like a flag. This “flag” is formed by parallel lines that go against the initial sharp price move, also called a “pole”. So, if the price shot up quickly, the flag would slope down slightly as the market takes a brief pause.

As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!). Detecting and trading reversal patterns are some of the best ways to make considerable profits. To help you quickly spot them, we created this trading patterns cheat sheet for quick visualization of these chart reversal patterns. Since we will cover a wide array of possible crypto day trading forecasting patterns, having a good overview will be essential.

In a bullish Gartley pattern, the trend moves from X up to A, reverses at AB, resuming at BC crypto triangle pattern and reversing again at CD. Waves A and C are made of five waves, while Wave B is made of three waves. In a bullish market, the corrective waves reverses the trend, while in the bearish market, the corrective waves result in the price to go up.

This will allow you to better assess trends and give you sufficient insight to forecast a possible trend continuation or reversal. Even though it appears during a downtrend, a Falling Wedge is usually an upward signal. It indicates that the downward momentum is weakening, and a reversal to an uptrend could be coming. The typical strategy used by experienced traders is to consider buying when the price breaks above the upper line of the wedge. Place a stop-loss below the most recent low within the wedge to protect against potential losses.

How to spot an ascending triangle on a crypto chart

The chartist will look for an increase in the trading volume as the key indication that new highs will form. An ascending triangle pattern will take about four weeks or so to form and will not likely last more than 90 days. Ascending triangles are an uptrend continuation pattern where you have higher lows with equal highs. In simple words, price falls from the same point of resistance however keeps making higher lows with every fall.

A symmetrical triangle pattern is a pattern formed by two converging trendlines with similar slopes. At the same time, they might ignore a breakout to the upside if the instrument is in a strong downtrend. We call the symmetrical triangle a neutral chart pattern because traders are not necessarily anticipating a breakout in a specific direction. The price is consolidating within a range, and traders will trade in whatever direction the breakout occurs.

Trading Strategy Example for Rising Wedge Chart Pattern

The entry can be after the pattern reaches point D, and stop loss should be placed just below the point D. Like the butterfly pattern, the crab pattern is a reversal harmonic pattern, composed of four legs, labelled XA, AB, BC and CD. Use the distance from below the bottom of the rounded bottom to the neckline, to set the target. The volume should decrease towards the middle of the pattern and rise again towards the end of it.

In the study of technical analysis, triangles fall under the category of continuation patterns. There are three different types of triangles, and each should be closely studied. These formations are, in no particular order, the ascending triangle, the descending triangle, and the symmetrical triangle.

1. This pattern indicates the selling pressure is stronger than the buying pressure and is considered a bearish formation, in general.
2. Triangle chart patterns are formed due to compressing price action followed by a break in either direction.
3. The significance and duration of a triangle pattern may vary depending on the timeframe in which it occurs.
4. They keep putting pressure on that resistance level and as a result, a breakout is bound to happen.
5. The area between the two peaks is the resistance level—the price point the currency struggles to rise above.
6. The following chapters will delve into detail on how to predict chart patterns and apply them to your technical analysis.

Entering a short position based on a triangle pattern

In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows. If this were a battle between the buyers and sellers, then this would be a draw. Seeing the price stabilize around the 61.8% level, you decide it’s a good time to buy Bitcoin, expecting that the price will start to rise again.